Semiconductor chip shortage to cost global automakers $210 billion this year – report

A new report by consulting firm AlixPartners has suggested the ongoing semiconductor chip shortage is expected to cost the global automotive industry an estimated $210 billion in revenue in 2021.

That’s almost double the company’s previous forecast, in May, of $110 billion. It had initially projected some $60.6 billion in lost revenues at the beginning of the year, when automakers started cutting production at plants.

“Of course, everyone had hoped that the chip crisis would have abated more by now, but unfortunate events such as the Covid-19 lockdowns in Malaysia and continued problems elsewhere have exacerbated things,” said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners.

AlixPartners forecasts that 7.7 million units of production will be lost in 2021 – up from 3.9 million in its May forecast.

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The updated figures come as car manufacturers continue to struggle with the semiconductor chip shortage, which is causing a halt to production in plants across North America, Europe, and Asia.

The growing demand for consumer electronics has worsened the scarcity of the microchips used in vehicles, stalling production at factories worldwide and pushing auto prices ever higher. Semiconductor chips are vital components in new cars and widely used in infotainment systems, as well as in basic parts such as power steering and brakes. An average vehicle may have hundreds of semiconductor chips.

AlixPartners previously expected to see production improving in the third quarter of 2021, but now doesn't expect to see that until at least the second quarter of 2022.

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Dan Hearsch, a managing director in AlixPartners’ automotive and industrial practice, said, “There’s no cushion. There’s nothing to absorb the impacts anymore, so every little thing – a week of downtime – is now creating a month of downtime someplace else."

Meanwhile, automakers across the globe, including Ford Motor and General Motors, have been warning of massive earnings cuts this year due to the chip shortage. General Motors President Mark Reuss said this week that the chip supply was coming from places where Covid-19 vaccination is low, “so there’s some volatility there ... we really need to get the vaccination and protocols into those plants, which we’re working very hard on.”

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